Independent MP Tony Windsor, who chaired the committee which handed down its report this evening, said the practice was threatening to "hollow out'' the future of country towns.

"If that becomes the norm, we do just have a lot of inland communities that are essentially camps of workers,'' he told reporters in Canberra.

"One of the great things that country communities have right across Australia is they still have a sense of community and it is under threat in some of these area.''

The report makes 14 suggestions to the mining industry and 21 recommendations to the federal government, including reviewing the fringe benefits tax arrangements for FIFO workers.

Mr Windsor stressed the report was not anti-mining, but calls for resource firms to value rural Australians and their towns.

The committee is asking companies to look at countries like Canada, where there is a better relationship between resource firms and the populations of the local towns they work near.

But representatives of the mining and resources sector have warned some of the recommendations could have devastating affects on business.

Association of Mining and Exploration Companies chief executive Simon Bennison said removing the fringe benefits tax would make no difference to the issues identified in the report.

“AMEC and its members believe changes to the FBT exemption will affect the economics of many projects and cost cutting initiatives will need to be implemented. This could result in further job losses in the future,” he said.

“Now is not the time to be adding any more costs onto industry."

WA REACTS WITH CAUTION

Chamber of Minerals and Energy of WA chief executive Reg Howard-Smith said politicians needed to be careful the recommendations did not increase the cost of doing business - especially given the high cost of doing business in WA.

“Unfortunately we are becoming a less attractive place to develop resources projects when compared with global resource rich nations and investment may be driven to other, lower cost, regions because of additional layers of taxation and charges which are continuing to drive up cost for doing business,” he said.

“Attraction and retention of employees would be severely impacted if companies attempted to force residential employment on their employees.”

Mr Howard-Smith said FIFO was a choice for workers and helped keep the labour market competitive.

“FIFO and residential employment are complementary, not supplementary approaches in a total workforce management package,” he said

Premier Colin Barnett said FIFO would always be a part of the WA workforce because there would always be mines in isolated locations.

WA Nationals MP Tony Crook said the report asked some poignant'' questions for the federal government.

He suggested a "royalties for regions'' fund to return to communities some of the wealth generated, much like the set-up in his home state.

Liberal MP Dan Tehan, who sat on the committee, said FIFO practices presented problems, but warned against making rash decisions that could risk mining profitability.

"If we just make mining less competitive ... I don't think that's going to improve the sector or regions overall,'' he said.

Australian Manufacturing Workers Union national president Andrew Dettmer said even towns like Gladstone in Queensland, which was built on mining, were now struggling under FIFO practices.

After-hours Gladstone resembled a "ghost town'', with locals forced to live 40km away and drive in to work every day to escape skyrocketing housing prices.

Scrapping the FBT exemptions would remove incentives for companies to use FIFO workers and encourage local hiring.

Mr Dettmer said in the past, mining companies were required to hire a certain number of locals and build a significant number of homes, houses and hospitals in towns.

"That was the price of doing business,'' he said. "It's unfortunate that that's no longer the case.''

SCEPTICISM OVER REPORT

Minerals Council of Australia chief executive Mitch Hooke said the report "should be treated with a deal of scepticism'', vowing to strongly oppose any changes to the tax treatment of FIFO.

Likening the practice to cancer would be offensive to FIFO workers, without whom some mines would not have enough staff to operate, Mr Hooke said.

"Mining and FIFO is not hollowing out the regions in which it operates. It is boosting incomes, attracting families and reducing unemployment,'' he said.

Some workers were moving to the regions permanently, he said, citing a KPMG study showed the population of Australia's mining regions had grown at 1.5 per cent per year in the five years to 2011, compared to 0.8 per cent for regional Australia more generally.

Australian Mines and Metals Association chief executive Steve Knott said FIFO and drive-in, drive-out working arrangements were as much driven by employee lifestyle choices as by resource companies' operational requirements.

Mr Knott also agreed with CMEWA that labour mobility was increasingly important for Australia's resource industry to compete on a global scale.

Communications Electrical Plumbing Union assistant national secretary Allen Hicks said FIFO may be essential during the labour-intensive construction phase, but the lives of these workers and their families were highly disrupted, so a better balance needed be struck.

News.com.au's Privacy Policy includes important information about our collection, use and disclosure of your personal information (including to provide you with targeted content and advertising based on your online activities). It explains that if you do not provide us with information we have requested from you, we may not be able to provide you with the goods and services you require. It also explains how you can access or seek correction of your personal information, how you can complain about a breach of the Australian Privacy Principles and how we will deal with a complaint of that nature.